Posted tagged ‘human capital’

This week I attended Mercer’s always well managed and informative analyst forum in Boston, MA. The meeting was focused on the talent consulting line of business.

Talent Management on the Rise

Mercer research indicates that human capital issues are a top CEO concern and managing talent is becoming a board of directors’ issue, moving beyond the traditional CEO succession planning and compensation to overall talent and workforce planning. The new Mercer Talent Barometer Survey, which was introduced at the 2013 World Economic Forum, reports that 60% of the 1,200 global companies surveyed are investing more in talent, but only 30% feel that their workforce plans are highly effective.

The business of talent has become both exciting and disruptive, with possible new entrants, globalization, media, innovations, and opportunities. (Talk about new entrants, eHarmony is considering getting into the talent matching game!)

With a possibility of double-digit growth, the talent group looked at how to grow across the talent value chain by expanding its services, tools and technology offerings for talent, rewards, and communications to increase growth and leverage Mercer’s depth of experience and capabilities.

The answer will become apparent over the next few months as more packaged solutions are launched that combine consulting, information, and technology to meet the needs of clients that want a less-customized consulting approach with “off-the-shelf” packaged and reusable services and tools.

Workforce Planning Versus HR Analytics

Some elements that will be leveraged are already mature and solid revenue producers. Surveys, benchmarks, and analytics for compensation/total rewards and job structures are a more than $200m line of business. Globalization of the revenues is already well on its way, with about equal distribution from North America, Europe, and emerging markets across 57 countries.

Instead of focusing on HR analytics, Mercer is emphasizing data acquisition and integration, data modeling, as well as data visualization as it applies to a wide range of workforce and data that drives business results. This may mean a consulting and outsourcing services engagement, it may mean workshops and training, or self-service use of integrated SaaS technology platforms with one or more Mercer products.

Think Big, Start Small, Move Fast

There are a lot of moving parts in Mercer’s strategy to create an integrated talent solutions portfolio.

It is brought together under the go-to-market Talent Impact label that includes new and existing products and services to forecast, engage, mobilize, reward and assess talent. Behind the scenes Mercer will be streamlining its own architecture into fewer and more integrated technology platforms to support the new offerings.

There is a lot to be done in a short time, but that is in alignment with the “think big, start small, and move fast” philosophy of Orlando Ashford, senior partner and president of Mercer’s talent business. Mercer is on the move!

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Although a bit smaller than the $1.9bn Oracle paid for Taleo (coincidentally at $46 per share as well) and the $3.4bn SAP paid for SuccessFactors, I believe that IBM’s acquisition of Kenexa, a cash transaction at $46 per share or ~$1.3bn and closing in Q4 2012, will have a much more immediate and larger impact than the aforementioned acquisitions.

Both Taleo and SuccessFactors were specifically acquired for their talent management (TM) technology. Beyond the strength of Kenexa’s technology, however, is the provision of TM services including:

Consulting

RPO

Employee engagement

Leadership development.

According to an IBM study conducted earlier this year, 71% of respondents cited “human capital” as the leading source of sustained economic value, above products and services innovation and significantly higher than technology. Kenexa, as a HCM and TM provider, will compliment IBM’s TM offering, which focuses on the full TM life cycle of attracting, developing, rewarding, and retaining talent. Specifically, IBM’s TM offering includes:

Recruiting

Learning

Performance management

Compensation

Succession management.

In addition to its multi-process HRO (MPHRO) offering, which includes TM, IBM also specializes in providing workforce strategy transformation, social technology, and analytics to predict and measure performance.

While RPO is part of IBM’s MPHRO offering, it also provides RPO on a standalone basis to GM. Kenexa’s RPO capabilities, however, will accelerate IBM’s RPO market share, making it one of the largest RPO providers globally with clients headquartered in North America, Europe, and Asia Pacific. Kenexa also delivers RPO services in Latin America including South America in ~25% of its contracts.

Kenexa’s BrassRing technology is one of the two most widely used applicant tracking systems in RPO contracts. Kenexa also brings its Kenexa 2x Recruit platform, which in addition to recruiting and learning contains the following performance management modules:

Goal setting

Competencies

Performance appraisals

Compensation

Career development and pathing

Succession planning.

NelsonHall estimates that Kenexa has more than tripled the size of its RPO business since 2006 with brand name clients including Ford and multi-regional contracts with Baker Hughes and Eli Lilly.

IBM’s price of $46 per share is a 42% premium over Kenexa’s August 24th close, but it will be well worth it. IBM is getting much more than software technology; it is getting assets, including human talent that can make a HCM difference. IBM’s plan is to combine its approach to social business, analytics, and TM to transform business processes to create smarter workforces with measureable business results. Given Kenexa’s record of growth and IBM’s experience with integrating acquisitions, this sounds like a good plan and a great business opportunity for both companies.

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Many are scurrying at a furious pace to publish 2010 HR and outsourcing trends and predictions, including the NelsonHall HRO team. My 2010 HRO list will be published in the next issue of HRO Today magazine, and Gary is providing RPO insight to several publications.

One of my predictions is that we are facing a spendless recovery in the HRO industry. Given the persistent uncertainty of the strength of the recovery and continued high levels of unemployment in many areas, cost will remain the leading HRO decision criteria factor. More contracts will get signed in 2010, although most will be smaller in scale and scope, and face deep scrutiny by risk adverse buyers.

What is the recipe for doing business in such a cautious environment? One way is to learn from HR trends and predictions to see how we in the outsourcing community can support clients as their needs and pressures change.

Mercer’s Human Capital group has published its list of the top five human capital issues for 2010. While presented by Mercer Australia, the issues highlighted are common to businesses around the world:

I was reminded of Alice in Wonderland by a comment Ken Gilbert, head of Human Capital at Mercer, made about the first challenge noted above: “Success in 2010 will be defined by organizations’ ability to ‘shrink and grow’ – maintaining a focus on costs while growing talent, workforce productivity and the bottom line.”

Wow. Alice grew very large and shrank very small, but she was not asked to do both at the same time. As budgets remain constrained and business demand starts to increase for targeted talent, HR will be looking for assistance from its partners to recruit, train and retain new employees both effectively and cost efficiently.

The benefits of improved recruiting will be as ethereal as the Cheshire Cat’s grin if turnover increases too much. Employee engagement and leadership development will be important elements in capturing growth opportunities, and throwing money around like the Mad Hatter at a tea party is not an option.

For example, targeted analysis of workforce and performance data will be needed to help focus attention and limited resources in the most impactful areas. Also, learning opportunities are needed to develop specific workforce skill sets, and as effective tools for increasing engagement. Careful planning, collaboration and curriculum management can achieve both goals while still reducing overall expense.

Buyers, be sure to share 2010 workforce goals and challenges with your HRO providers so they better understand your needs. Providers, review the services you provide to your clients and identify how they support current and returning business needs. Where might a little bit of proactive consultation show how your current or new services will help the client organization shrink expenses and grow business results at the same time?

If you want to keep your head, this is not the time to pitch a grand transformation plan. Whether it is building a closer relationship through better utilization of current services, or growing the relationship through very precise projects and new services, it is time to help Alice find the wonder in Wonderland.